Culture Change: Senior Leaders Must Lead The Way

Culture Change: Senior Leaders Must Lead The Way

Culture Change: 30 Years of Lessons Learned

It’s been a long time coming, 11 years and multiple drafts, but I’m excited to announce that my book is finally looking like it is going to be completed. Yay! In my book, I share the many things I’ve learned over 30+ years of searching for the answer to one question: How do we achieve meaningful and sustained culture change in organizations?

This is one of the chapters from the book. I am offering it in the hope it provides some useful insights but also to ask for your feedback. I would sincerely appreciate any thoughts or suggestions you would care to share. Thank you in advance! Onwards….

Lesson 1: Senior Leaders Must Lead The Way

Who is accountable for an organization’s culture? The answer is leaders. By ‘leaders’, I mean anyone at any level who others look to for guidance, especially people who hold senior positions in an organization. The reason is simple — leaders are the single most important factor in determining the success of any culture change effort.

If you rolled your eyes and said ‘duh…everyone knows that’, you’re not alone. After all, if senior leaders are committed to the change effort, they will make it a priority and allocate the resources, required to be successful. Right? The answer is ‘yes and…’

Absolutely, leaders must commit time, people and money if the change effort has any chance of being successful. The thing is they need to go further which means owning it. They must be fully committed to the change and personally involved in a meaningful way in all phases of the change effort. Sure, they are going to need help, but they are going to have to lead the way which means showing — not just telling — others what is expected, making tough decisions and creating the conditions for success. It can’t be a, nice to do, nor can it be delegated to Human Resources or others.

Isn’t Culture a Human Resources Thing?

In almost every organization I’ve worked with, Human Resources are responsible for culture. Leaders might say they own it, but the reality is they typically articulate values and, in some cases, identify the culture the organization needs, communicate this to employees and then hand off the heavy lifting to Human Resources to make the change happen. Unfortunately, this doesn’t work.

Don’t get me wrong. Human Resources plays a critical role in culture change. They own a lot of the processes that encourage and reinforce expected behavior, such as hiring practices, performance management systems, advancement criteria and so on. Leadership and organization development professionals can also provide leaders with expert guidance and support in areas such as behavior change, coaching and feedback and change management. In other words, Human Resources can and should be strategic partners helping leaders with the change effort, but they cannot do it for them.

Why not? Three reasons —- behaviors, practices and environment.

Leaders’ Actions Send Messages to Others

Through their words and, more importantly, their actions, leaders send messages about the expected way of doing things. When words and actions are consistent — they walk the talk — the message is clear and pretty much guaranteed to influence others to behave in a similar manner.

The thing is employees notice absolutely everything that a leader says and does. If a leader consistently arrives early for a meeting, his or her direct reports will do the same or risk being perceived as unpunctual and disrespectful of others’ time. If he or she always wear the appropriate safety gear on a work site, people know this is important and they can expect to be censured if they don’t do the same. Of course, the opposite is also true. A leader that is frequently late for meetings and appointments sends the message that it is okay not to be punctual. Likewise, a leader who blames others for his or her mistakes is telling people through his actions that avoidance of responsibility is okay.

What if there is a disconnect between what a leader says and does? The answer…people will default to actions as the real message. If a leader says candor is important and she wants employees to openly voice their concerns and then reacts negatively to their comments, guess what the message is? Candor means telling her what she wants to hear. A few situations like this and people will have figured out the rules — how to make her believe they are being candid while protecting themselves from harm. The leader is happy thinking employees are speaking candidly when the reality is far different. To make matters worse, the credibility of the leader has been damaged. People now know not to believe what she says but rather to look to her actions for direction.

The bottom-line is a leader’s words and actions must be consistent and role model what is expected — no exceptions and no excuses! No amount of effort by Human Resources can replace this.

Leaders Reinforce Culture in Day-To-Day Practices

Practices are the repeat patterns of activity or routines that people use as they go about their work. They are different from processes which involve the transformation of an input into an output. Practices cover a wide range of routines including the way decisions are made, information is shared, and people are recognized, just to name a few. They are the building blocks that help to determine “the way that things are done around here”.

While every employee use practices to some extent, leaders employ more of them more extensively which gives them greater influence over culture. This includes the approach they take to developing plans, conducting meetings, managing performance, developing employees, and so on and so forth. To illustrate the effect practices have on culture, contrast meetings that are managed in a structured and disciplined manner with ones that are loosely organized.

A disciplined approach to meetings typically includes a carefully designed agenda that is sent out well in advance. Materials such as briefing notes and reports are distributed prior to the meeting with clear instructions regarding expected action, such as read prior to the session and come prepared with questions. In some cases, there is even a clear ask such as, this item requires a decision while another seeks advice or feedback. The meeting itself starts on time and the agenda is tightly managed. The rules of engagement are clear and closely monitored. Minutes are taken with decisions and actions noted and distributed to the attendees. This approach is usually preferred by leaders who value efficiency and discipline. They assess the effectiveness of a meeting by the decisions made, issues resolved, and actions identified. Relationship building is, in most cases, viewed as secondary to achieving these objectives.

Loosely organized meetings are very different. These are usually preferred by leaders who believe the primary purpose is to share information, exchange ideas and build relationships. For these leaders, making decisions, resolving issues and developing action plans happens in other ways. It is therefore not surprising that their meetings often lack structure and discipline. If there is an agenda, it may or may not be followed. It might even be sent out in advance and include some pre-meeting materials but there is an implicit understanding that this is a guideline rather than a commitment. Often, a good portion of the agenda is never reached, and this is okay. Similarly, there may or may not be minutes depending on what happens in the meeting and if any decisions are made or actions identified.

This is just one example. If the same beliefs are reflected in other practices, there is a compounding and reinforcing effect. For instance, a leader who believes relationships are critical might take a consultative and inclusive approach to decision-making and problem-solving. Similarly, a leader who believes discipline and efficiency are the keys to success is going to apply this in other practices such as, setting clear objectives and systematically monitoring and measuring performance. The more different practices are consistent, the more impact they have on culture. This is what I call using a network of practices, which is discussed in more detail in a later chapter.

The practices used by leaders not only reflect their beliefs but are an indicator of their expectations of others. If a leader believes discipline is important, he is going to assess others performance and abilities using this as a criterion. Anyone who demonstrates a lack of discipline, as perceived by the leader, is taking the risk of being judged negatively. In fact, practices may be even more influential than behavior as they directly affect the way people work and interact and how they are perceived by others. Once again, this is not something Human Resources can do for leaders.

Leaders Create the Conditions for Success (Environment)

Leaders also determine the design of structures, systems and processes. They decide how space is used, what artefacts are on display (or allowed) and what traditions and rituals are practiced. By the choices they make, leaders create the conditions that encourage and reinforce expected behaviors and practices.

My favorite way to explain this is to use a metaphor of someone trying to lose weight. It is easy to identify the behaviors to start and stop, such as eating more fruits and vegetables, cutting out foods with high levels of sodium and sugar, and exercising more. It’s also easy to identify practices to reinforce these behaviors such as using an app to track food consumption and exercise, weighing in on a weekly basis and attending regular meetings with other people who have similar goals. If I do these things, chances are pretty good I am going to lose weight at least in the short term. The challenge, as many of us know, is overcoming temptation especially when you’re stressed or tired. This is where the environment plays an important role by creating the conditions for success.

If the kitchen cupboards are stocked with salty snacks, cookies and chocolate, eventually the temptation is going to be too great to resist. Similarly, if other family members are munching away on high-calorie foods and drinks that you love, I can pretty much guarantee everyone of us is going to cave. Likewise, if you hate going to the gym and this is your main source of exercise, there is no way you will be able to sustain the motivation to keep going. This is what I mean by the environment needing to support the desired behaviors in order to create the conditions for success.

We see this same pattern repeated over and over in organizations. A tremendous amount of effort and resources is invested in articulating and communicating the case for change, values and expected behaviors. Expected behaviors are then embedded in various Human Resource processes such as talent acquisition and so on. There may even be a commitment to coach and hold leaders accountable for modeling these behaviors. Yet, time and time again these efforts fail to result in meaningful, sustained culture change. Why not?

When we ask people to change their behavior but don’t align the system to support these behaviors, we are setting them up to fail. Human Resource policies, programs and processes are a critical part of this system. Aligning these to support the desired change is essential and fortunately usually happens, at least to some extent. The problem is other important parts of the system, many owned by other functions and groups, often get ignored.

Take Legal, for example. In large mature organizations, the Legal group is often a gatekeeper reviewing and approving contracts or arrangements. It is not unusual, to hear stories of long delays and the need for multiple levels of approval to get something done. This happens for very good reasons, such as the need to protect the organization’s best interests, meet its regulatory and legislated obligations, manage costs and get the best possible deal with suppliers. It does, however, contribute to slow decision-making and missed opportunities.

Let’s say things change. New competitors, emerging technology and changing market and customer expectations require increased speed and responsiveness to compete. In other words, the organization needs to be more agile which means decisions need to be made swiftly often with limited data meaning risks are going to be taken and mistakes made. This is a significant culture change for an organization that has been successful operating in a slow, cautious and methodical manner. The thing is, for the organization to become agile, the role of Legal and many of its core processes and policies need to change. They must align with and support agile behaviors and practices. This is threatening not only to Legal as a function but to its individual members. It also challenges existing beliefs as to the best and right way of doing which motivates people, often with good intentions, to resist the change.

Clear communication of the case for change accompanied by the effective implementation of change management practices can help to overcome resistance, at least to some extent. However, for the change to be successful and accomplished in a reasonable time, senior leaders must be actively involved in identifying and implementing the required changes to structures, processes, policies and so on. To be clear, they are not doing this alone. They need to engage subject matter experts and others whose expertise is critical to arriving at the best possible solution. The leader’s role is to challenge, push and test to ensure changes deliver the expected results. Ultimately, leaders must create the right environment so new behaviors can take root and flourish. They must be willing to make tough, unpopular decisions and hold people accountable in order to create the conditions for successful culture change.

The good news is culture change can be achieved in a matter of months, not years, when senior leaders effectively use a combination of behaviors and practices and create the conditions for success. To illustrate, let’s look at the story of Bill G., CFO of a large U.S. telecommunications company.

Bill’s Story

Bill had recently been hired to replace the outgoing CFO who was retiring. He brought to the role 25 years of experience and a proven track record leading several finance organizations in the telecommunications industry. The company he joined was a relatively young organization but growing quickly as it capitalized on new and emerging technology. It was known to be innovative and entrepreneurial with tremendous growth potential.

It wasn’t long before Bill realized that this entrepreneurial spirit included what he described as ‘an allergic reaction to anything resembling discipline, structure or process’. Employees, led by senior leaders, saw these as bureaucratic impeding their ability to be flexible, responsive and take risks; qualities that had played a major part in their success to date. As a result, past efforts made by the Finance team to introduce more discipline in areas such as budgeting, reporting and analysis never got off the ground. Bill experienced this first hand at one of the early meetings he attended with the rest of the executive team.

The executive team was meeting to decide on the coming year’s advertising plan and budget. Several options were on the table for consideration requiring a sizable financial investment. The discussion was animated as executives shared their opinions as to the best way to proceed. This went on for a while with a lot of back and forth as people discussed the merits of the different options. When Bill suggested they consider the results from past advertising campaigns, there was silence. It turns out, there was no data available. Marketing didn’t have any performance metrics and wasn’t tracking results. Executives were making decisions involving millions of expense dollars based on intuition and personal preferences.

The more questions he asked and investigating he did, the more he realized this was the way things were done. Discipline was simply not part of the culture. He saw examples everywhere he looked from day-to-day practices such as meetings and appointments to decisions involving millions of dollars. While the entrepreneurial spirit was great, the lack of discipline was costing the company large sums of money due to rework, redundancies, poor decisions and so on and so forth. This was also contributing to productivity and performance issues, as well as taking people away from doing higher value work. The challenge, as he saw it, was to introduce more discipline without crushing innovation and agility.

The Solution Part 1 – Behaviors and Practices

Recognizing the difficulties in attempting to tackle the issue at the enterprise level, he decided to focus on things within his immediate control and sphere of influence. He started by introducing practices designed to bring more discipline into the way the Finance team worked starting with meetings and appointments. Bill reinforced these practices with his own behavior. For example, he made it clear that people were expected to be on time and prepared when attending meetings, no exceptions and no excuses. To this end, he introduced the following practices and behaviors:

Appointments and One-on-One Meetings

Practices

To schedule an appointment with Bill, people had to explain why the meeting was required and the expected outcome. If his input or a decision was required, relevant background information was to be provided so he could review it prior to the meeting.

Appointment times were strictly adhered to. If someone was more than 5 minutes late, the appointment was automatically cancelled, and the person was forced to reschedule another date. This was a big deal as it was extremely difficult getting time with him. It could be weeks before the next opening in his schedule. People quickly learned to be on time.

Bill’s schedule included time for travel to meetings, unexpected requests, preparation and other events. While there were times when emergencies required a change to his schedule, these were the exception and time was blocked to allow for canceled appointments to be rescheduled at an early date.

Behaviors

Bill was always on time for appointments and he expected the same of others.He read everything provided in advance. If the work provided wasn’t up to his standards, he would send it back and, in some cases, canceled the appointment. Initially, he provided clear written feedback as to what was missing and questions that needed to be answered. This happened once. After that, the person was expected to figure out what was missing and fix it.

At the end of one-on-one meetings, he provided feedback including what was done well and needed to be improved for the next time. For example, he expected people to provide a recommendation with their rationale when asking him for input or a decision. His feedback included coaching to help the person improve the quality of their recommendations.

Meetings

Practices

Meetings started and ended exactly at the scheduled time. If the meeting was to start at 9:00 a.m., he locked the door and started the meeting. People were not allowed to enter the meeting after it started. This included his boss and other senior people. It caused quite a stir at the beginning!

Bill introduced a set of practices aimed at improving the efficiency and effectiveness of meetings. These included publishing the meeting agenda with background information to be reviewed one week ahead of the meeting date. The agenda included the ‘ask’ for each item, such as provide input, identify issues or obstacles, make a decision or provide information. Items that fell into the ‘provide information’ category were reviewed to determine if these could be effectively addressed in other ways and removed from the agenda. The amount of time allowed for each agenda item was determined by the complexity of the topic and the “ask”. In the meeting, these timelines were strictly adhered to albeit with some growing pains at the outset. Initially, agenda items were closed without having achieved the “ask”. As the team got better at using the available time, this became the exception rather than the rule.

He also implemented meeting principles that clearly defined expectations for behavior. These included being present and engaged which meant turning off cell phones and other non-essential devices. To address potential emergencies, he provided a person outside the meeting to contact. These principles were posted on the meeting room wall and used as a form of performance review at the end of each meeting. Specifically, the team quickly did a ‘green, yellow, red’ scorecard of each principle to indicate what they did well and needed to do better. A brief discussion of the ‘do better’ principles clarified expected changes for the next meeting.

Behaviors

Bill always arrived at least 5 minutes early for every meeting. If it was someone else’s meeting, he would wait 10 minutes and if the meeting hadn’t started, he would leave. Initially, this was a problem with his boss and his peers, however, he was able to manage the issue by getting their buy-in and agreeing to return to meetings if required. He made his point swiftly and effectively.

In the first meeting he hosted, one person made the mistake of not taking him seriously and answered a call. Bill stopped the discussion, walked up to the person and held out his hand for the phone. He told the person at the other end to call back when the meeting was over and turned off the phone. He then took the phone and dropped it in the garbage can. Everyone laughed, and the discussion continued. At the break, the phone’s owner approached Bill and apologized asking if he could have his phone back. Bill said no. The rules were clear and there needed to be consequences. If he wanted a phone, he was going to have to get a new one. The story traveled through the building like wildfire.

Within days, people began to show up on time for their appointments with Bill. Within a few weeks, people consistently arrived on time for meetings and not just his meetings but also meetings hosted by his boss and others in the organization. Meetings became more efficient and effective and people appreciated that they could depend on the fact that meetings would always end on time.

This discipline wasn’t restricted to appointments and meetings. He applied the same principles to performance management, written communications, business case preparation, presentations and an assortment of other practices. He used every opportunity to bring greater discipline into day-to-day work and interactions.

Four months after Bill joined the company, employees described a significant, observable culture shift towards increased discipline resulting from the behaviors and practices he role modeled. Although initially limited to the Corporate Finance team, they were already seeing evidence of change elsewhere as other leaders and teams followed his lead.

The Solution Part 2 – Creating the Conditions for Sustained Success

In the words of one employee, Bill’s primary goal was to increase the discipline applied to cost management and decision-making by implementing initiatives that would encourage “deeper economic and operational analysis from both a tool and process perspective”. The behaviors and practices he introduced were only the beginning. Bill recognized that addressing the big issues at the enterprise level required a substantial investment in core processes and technology, as well as changes to the way Finance was structured. These changes required careful planning and project management with implementation happening over a period of 24 months.

An Interim Solution – Paving the Way for Change

Prior to Bill taking over as CFO, the vast majority of Finance professionals were generalists who reported directly to business unit leaders. Their responsibilities were broad and included budgeting, cost and sales estimates, expense management, reporting and anything else the business unit leader needed. A few specialists reported directly to the CFO handling Corporate level fiduciary requirements, such as Treasury, Investor Relations, Financial Planning and Analysis (FP&A), and Controller/Accounting.

The Finance generalists concentrated their efforts on meeting the needs of the business unit leaders. As a result, every business did things differently. They had their own way of estimating sales and revenue, budgeting, reporting, managing costs, analyzing results and so on. When it came time to pull together financial information at the enterprise level, the Corporate team had a mess on their hands, if they could get the information they needed from the business at all. This led to long delays and inaccurate and incomplete financial information that no one trusted.

Many of the processes required to solve this problem were already in place. The issue was they were not being followed. One option was to mandate that the businesses comply with the Corporate processes, however, this would put the Finance generalists in the difficult position of having to push back on leaders and not deliver what they wanted. This wasn’t realistic given business leaders set the Finance generalists’ objectives, assessed their performance, determined rewards including merit increases, and had a significant say in advancement and development opportunities. Asking the generalists to put Corporate needs ahead of the business and go against the wishes of the business leader was setting them up to fail.

In the short-term, Bill decided to do things that didn’t totally resolve the situation but certainly improved it. The first was to insist on a greater role in setting expectations and evaluating the performance of the Finance generalists. By making this a shared responsibility, he was able to align their objectives with his priorities while at the same time providing an incentive to consider Corporate Finance requirements when they set priorities. Second, he sought agreement from business leaders to comply with the processes most critical to addressing the issues with the timeliness and accuracy of financial information. Given the severity and visibility of the problem, it was relatively easy to get the support he needed. With this in place, he quickly deployed resources to ensure expectations were clear, and the processes and tools understood.

Phase Two – Process Changes

With the immediate problem addressed, Bill directed his attention at making the changes required to achieve his goal of increasing the discipline applied to cost management and decision-making. To this end, he identified and set about implementing a set of initiatives targeted at improving the timeliness, quality and quantity of financial information available to business managers when making decisions. This included launching a major Activity Based Costing (ABC) initiative, adding rigor to the approval process for new hires and capital funding, and spearheading a new business priority and objective setting process. He also partnered with the CIO to lead the implementation of a decision-support system (data and analytics). These initiatives were prioritized and carefully planned so as not to disrupt business-as-usual while ensuring progress was made as quickly as possible.

Recognizing this was not a strength in Finance, or elsewhere, Bill established and staffed a new Project Management Office (PMO). The PMO was responsible for helping the various project teams effectively plan, implement, monitor and report on their progress. Although not entirely successful, due to new hires who clashed with the existing culture, it resulted in a level of consistency and transparency that had been absent from past initiatives.

Phase Three – Structural Changes

Approximately six months after the business leaders agreed to follow the prioritized Finance processes, there continued to be major issues with the timeliness and accuracy of financial information. Despite their assurances, the business leaders had quickly reverted to their old ways of doing things insisting that the Finance generalists make their needs a priority. While most of the generalists did their best to deliver the information required by Corporate, workload pressures and competing demands meant delays and inaccurate and incomplete information was the norm.

The situation came to a head when the company was called to task by outside analysts for overestimating projected revenue and failing to notify the market that expectations were going to be missed. Although painful, this was the opening Bill needed to restructure the Finance function. He immediately moved to change reporting relationships so the generalists reported directly to him and indirectly to the business leaders.

Making this happen was not easy. The business unit leaders fought hard to maintain the status quo. They argued that the current structure allowed them to focus their Finance staff on business priorities, such as pricing, competitive bids and so on. They feared that a centralized structure meant they would lose control of these resources which would cause delays in getting the Financial support required to effectively manage their P&L. In the end, the financial forecasting and reporting issues outweighed their concerns and the CEO supported Bill’s restructuring plan.

Almost overnight, things started to improve. The Finance generalists still had a difficult task as saying no to business leaders is never easy. Knowing their boss, Bill, supported them and would step in to help when needed went a long way to giving them the confidence and courage they needed. Indeed, in the early days, there were several stories of Bill confronting business leaders and C-suite executives who tested the new way of doing things. This only had to happen a few times for the situation to improve but the message was clear. This was the new world order…take it or leave it.

Of course, sustainability ultimately depended on Finance’s ability to deliver timely, accurate financial information that addressed the company’s fiduciary obligations and a need for greater discipline in cost management and decision-making. If the problems persisted after the change, things would have quickly reverted back to the old way of doing things. Fortunately, the changes resulted in an immediate improvement to the quality and accuracy of financial information and only got better as the more complex, longer-term initiatives were implemented.

Two years after he was hired, Bill had achieved his goal of increasing discipline in cost management and decision-making. He also changed the culture. By changing core processes and structures, he created the conditions to encourage and sustain higher levels of discipline not just in Finance but across the company. However, as the business unit leaders had feared, there was also a decrease in the flexibility and responsiveness that was such a valued part of the company’s entrepreneurial culture. This contributed to a level of resentment and disapproval of the changes Bill had introduced, although most leaders acknowledged that it was the right thing to do. This rebalancing or calibration of culture attributes is part of the challenge of changing culture, and a topic for a later chapter.

In Summary

Bill’s story is an example of leader-led culture change. He concentrated his efforts on changes within the scope of his role and decision-making authority and used the tools at his immediate disposal to move things forward. This was not a ground-up effort to engage employees to get their buy-in and support. You may also have noticed that Bill’s story doesn’t make mention of defining expected behaviors, communicating these to employees and embedding them in Human Resource processes and practices. Nope…this was an influential leader leading the way through his actions. This is not to say there isn’t value in engaging employees or partnering with Human Resources, which can be powerful ways to accelerate change. It just isn’t the approach Bill used which, contrary to popular opinion, was very effective.

The thing is achieving meaningful and sustained culture change requires that leaders lead the way. They do this by role modelling values and behaviors, using day-to-day practices, and creating the conditions for success. When this is done effectively, culture change is pretty much guaranteed.

Even more exciting is the fact that this is something any leader at any level can do. You don’t have to be in a senior management position. Anyone in a leadership role can use their words and actions in an intentional and purposeful way to shape and change culture. You may not have the power to change enterprise level structures and processes, but you can change the culture in your team and, perhaps in so doing, influence the culture of the organization. Furthermore, when a critical mass of leaders purposefully and authentically uses a similar set of behaviors and practices, the potential for positive change increases dramatically. When the organization system is aligned to support the change, well…the sky is the limit.

Download the PDF of Chapter One by Filling Out the Form Below

Your Name (required)

Your Email (required)

Subject
[Yes I would like the PDF version of Chapter 1.]

Your Message
[Enter your name and email and we will send Chapter 1 to you shortly.]

Dr. Nancie Evans

Dr. Nancie Evans is co-founder and VP Client Solutions at Culture-Strategy Fit Inc. specializing in the alignment of organizational culture and strategy. She has developed a unique set of leading-edge diagnostic tools and approaches that provide leaders with deep insights into the culture of their organizations, how it is supporting or getting in the way of strategy execution, as well as the levers that they can use to drive rapid culture change.

Culture-Strategy Fit®

Culture-Strategy Fit Inc. is a leading culture and executive leadership consulting firm conducting groundbreaking work in leveraging culture to drive strategy and performance. It’s suite of culture surveys and culture alignment tools are used by market-leading organizations around the world.